02-12097. Presubscribed Interexchange Carrier Charges

AGENCY:

Federal Communications Commission.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

This document initiates a rulemaking proceeding to examine presubscribed interexchange carrier-change charges (PIC-change charges). PIC-change charges are federally-tariffed charges imposed by incumbent local exchange carriers on end-user subscribers when these subscribers change their presubscribed long distance carriers. PIC-change charges currently are subject to a $5 safe harbor within which a PIC-change charge is considered reasonable. The $5 safe harbor was implemented in 1984, and industry and market conditions have changed since that time. Therefore, this document seeks comment on revising the Commission's policies regarding the PIC-change charge.

DATES:

Comments due June 14, 2002, and reply comments due July 1, 2002. Written comments by the public on the proposed information collections are due June 14, 2002. Written comments must be submitted by the Office of Management and Budget (OMB) on the proposed information collections on or before July 15, 2002.

FOR FURTHER INFORMATION CONTACT:

Jennifer McKee, Wireline Competition Bureau, Pricing Policy Division, [phone]. For further information concerning the information collections contained in this document, contact Judith Boley Herman at [phone], or via the Internet at [e-mail].

SUPPLEMENTARY INFORMATION:

This is a summary of the Commission's Notice of Proposed Rulemaking (NPRM) in CC Docket No. 02-53 released on March 20, 2002. The full text of this document is available on the Commission's Web site Electronic Comment Filing System and for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 Twelfth Street, SW, Washington, DC, 20554.

This NPRM contains proposed information collections subject to the Paperwork Reduction Act of 1995 (PRA). It has been submitted to the Office of Management and Budget (OMB) for review under the PRA. OMB, the general public, and other Federal agencies are invited to comment on the proposed information collections contained in this proceeding.

Paperwork Reduction Act

This Notice of Proposed Rulemaking (NPRM) contains a proposed information collection. The Commission, as part of the continuing effort to reduce paperwork burdens, invites the general public and the Office of Management and Budget (OMB) to comment on the information collections contained in this NPRM, as required by the Paperwork Reduction Act of 1995, 44 U.S.C. 3501 et seq. Public and agency comments are due at the same time as other comments on this NPRM; OMB notification of action is due July 15, 2002. Comments should address: (1) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (2) the accuracy of the Commission's burden estimates; (3) ways to enhance the quality, utility, and clarity of the information collected; and (4) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology.

OMB Control Number: None.

Title: Presubscribed Interexchange Carrier Charges.

Form No.: Not applicable.

Type of Review: Proposed new collection.

Respondents: Business or other for-profit.

Number of Respondents: 69.

Estimated Time Per Response: 85.5 hours.

Total Annual Burden: 5900 hours.

Total Annual Costs: $45,885.00.

Needs and Uses: The information would be used to determine local exchange carriers' costs of providing PIC-change charges for setting rates for these charges.

Background

This Notice of Proposed Rulemaking, adopted March 14, 2002 and released March 20, 2002 in CC Docket No. 02-53, FCC 02-79, initiates a proceeding to examine the charges imposed on consumers for changing long distance carriers, known as PIC-change charges. These charges currently are subject to a $5 safe harbor within which a PIC-change charge is considered reasonable. This $5 safe harbor was established by the Commission in 1984 and affirmed in 1987, but the Commission has not reviewed the reasonableness of this safe harbor since that time.

On May 16, 2001, the Competitive Telecommunications Association (CompTel) petitioned the Commission to initiate a rulemaking proceeding to revise its policies governing the PIC-change charge. Based on CompTel's petition and the comments received in response to it, we conclude that circumstances have changed since the Commission's last comprehensive review of this issue, and the $5 safe harbor may no longer be reasonable. The current safe harbor was established based on the difficulty of assessing actual costs by carrier for this service, what was known generally about the costs of providing this service, and a determination that it was good policy to discourage excessive switching of carriers. All three of these factors are now ripe for reexamination.

Discussion

We undertake this rulemaking with the goal of establishing a reasonable PIC-change charge under current conditions. We will examine whether to base the PIC-change charge on an examination of carrier costs or whether we can rely on market forces to ensure reasonable rates. We will consider what costs carriers reasonably can recover through the PIC-change charge and whether to take non-cost factors into account in determining a reasonable charge. We will also examine whether to establish a national safe harbor, whether carriers should submit individualized cost support with their tariffs, or whether we should review rates solely through our enforcement processes. We seek comment on these issues, as well as any alternative means of ensuring the reasonableness of PIC-change charges.

As a threshold matter, we think it is important to examine whether the PIC-change charge should be a regulated cost-based charge, or whether market forces will constrain PIC-change charges to reasonable levels. The current safe harbor was established in 1984, based largely on an analysis of carrier costs. When a market is not competitive we cannot rely on market forces to constrain rates. Thus, we must examine the market for PIC-change services to determine whether a cost-based or market-based approach is the appropriate means to regulate PIC-change charges. Under current network configurations, a PIC change must be completed by an end user's LEC. The change relates, however, to a customer-carrier relationship between the end user and an IXC, which may or may not be affiliated with the end user's LEC. We seek comment on the nature of the market for PIC-change services and the need for the Commission to continue to apply a cost-based standard to ensure reasonable rates for PIC-change charges. We also seek comment on whether reliance on market forces could be made more practicable by modifying network configurations or the relationships between LECs, IXCs, and end users.

If we conclude that market forces will not ensure reasonable PIC-change charges, we must determine whether PIC-change charges should be based on costs, and, if so, what costs those charges should recover. In the 1984 access charge order, the Commission simply said that a presubscription charge that covers the unbundled costs of a subscription PIC change would be reasonable. Parties submitting comments on CompTel's Petition have widely varying contentions with regard to the relevant costs. Some commenters contend that costs related to the actions necessary to process a request and implement the change are the only costs that should be recovered. Another contends that the PIC-change charge should recover a wider array of costs, including costs incurred in administering customer allegations of slamming. We seek comment on the types of costs that should or should not be recovered through the PIC-change charge and why. We ask that commenters be as specific as possible. Our goal is to establish a standard that does not require continuous revision as technology evolves. Accordingly, we ask that commenters identify the individual functions that make up the PIC-change process, describe the process in detail, and explain why each function is necessary. For example, if customer care personnel perform multiple functions manually, commenters shall separately identify each function and its purpose. Likewise, commenters should identify by function the services that are automated, not merely name the automated facilities that are used to perform these services.

Some commenters assert that it is more costly to perform PIC-change services for certain customers than others. For example, SBC notes that customers subscribing to SBC's “PIC freeze” service require more manual intervention than non-subscribers to process a PIC change. The carrier also suggests that “excessive” PIC changes would justify an above-cost PIC-change charge. Many parties contend that this is no longer a valid policy reason for maintaining a safe harbor that is not supported by current cost data. We seek comment on whether and how such issues should be taken into account in establishing a reasonable PIC-change charge. Should the same PIC-change charge apply to all customers, regardless of whether they subscribe to an incumbent LEC's PIC-freeze service, or should LECs impose a higher charge for PIC-freeze usage? Carriers may allow customers to freeze their PICs for multiple services, i.e., interstate, intraLATA intrastate, and local service. If commenters argue that the additional costs of conducting a PIC change for a customer subscribing to a PIC-freeze service should be recovered through the PIC-change charge, we seek comment on how to allocate the additional costs among jurisdictions. Should end users incur the same charge each time they request a PIC change, or should a higher charge be imposed upon a customer that requests “excessive” PIC changes? If the latter, why, and what constitutes “excessive” PIC changes? Additionally, when the Commission first identified the potential for excessive carrier switching as a basis for the safe harbor, significant uncertainty about the ability of carriers to identify the costs of PIC changes existed. There is evidence that this circumstance has changed. How should a carrier's ability to identify accurately its actual PIC-change costs affect the weight to be given to non-cost-based rationales for a particular safe harbor?

In light of the existence of intrastate, intraLATA toll dialing parity, most end users currently have a choice of both interLATA and intraLATA interexchange service providers. Accordingly, end users may change both their interLATA and intraLATA carriers simultaneously to a single carrier. In that circumstance, incumbent LECs may impose both an interstate and intrastate PIC-change charge for the transaction. We seek comment on whether this amounts to a double recovery. Interested parties are asked to comment on whether it is reasonable for incumbent LECs to recover both charges, a percentage of each charge, only one of the charges, or some totally different charge under these circumstances.

If we determine that the PIC-change charge should be cost-based, we must then establish a means to ensure incumbent LEC PIC-change charges recover only the costs associated with that service. We seek comment on whether the Commission should (1) require the filing of cost support with each PIC-change charge tariff; (2) rely on the formal complaint process and other enforcement mechanisms to review rates; or (3) establish a safe harbor to ensure reasonable rates.

If we conclude that a safe harbor is the most efficient means of ensuring reasonable rates, we will need to establish that safe harbor. We seek comment on the best means for doing so. Should we establish a safe harbor on the basis of the incumbent LECs' average costs? Should we base the safe harbor on the incumbent LECs' lowest cost, giving carriers the option of providing cost support to justify a higher charge? If so, what would the lowest cost be? In this respect, we note that some carriers charge substantially less than the current safe harbor. For example, as noted above, BellSouth charges $1.49. Does BellSouth's $1.49 charge, or any other charge differing from the safe harbor, establish a lower or upper bound? Commenters should provide cost evidence supporting any safe harbor proposed. Should the Commission distinguish between incumbent LECs, and, if so, on what bases? Should the Commission use a proxy and, if so, what is a reasonable proxy for the PIC-change service? Should there be separate proxies for large and small incumbent LECs? Do market proxies exist? Are state-arbitrated rates for unbundled network element platform (UNE-P) and resale migrations or state-regulated rates for intraLATA PIC-change charges reasonable proxies for the interstate PIC-change service? Is there a weighted average of several rates that would constitute a reasonable proxy? Parties are asked to comment on these options, and submit alternative suggestions for our consideration.

Procedural Matters

Ex Parte Requirements

This proceeding will be governed by “permit-but-disclose” ex parte procedures that are applicable to non-restricted proceedings under 47 CFR 1.1206. Parties making oral ex parte presentations are reminded that memoranda summarizing the presentation must contain a summary of the substance of the presentation and not merely a listing of the subjects discussed. More than a one-or two-sentence description of the views and arguments presented generally is required. See 47 CFR 1.1206(b)(2). Other rules pertaining to oral and written presentations are set forth in § 1.1206(b) as well. Interested parties are to file any written ex parte presentations in this proceeding with the Commission's Secretary, Marlene H. Dortch, 445 12th Street, SW, TW-B204, Washington, DC 20554, and serve with three copies: Pricing Policy Division, Common Carrier Bureau, 445 12th Street, SW, Room 5-A452, Washington, DC 20554, Attn: Jennifer McKee. Parties shall also serve with one copy: Qualex International, Portals II, 445 12th Street, SW, Room CY-B402, Washington, DC 20554, [phone].

Initial Regulatory Flexibility Act Analysis

As required by the Regulatory Flexibility Act of 1980, as amended (RFA), 5 U.S.C. 603, the Commission has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on a substantial number of small entities by the policies and rules proposed in this NPRM. The RFA, see 5 U.S.C. 601 et seq., has been amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), Public Law 104-121, Title II, 110 Stat. 857 (1996). Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the NPRM. The Commission will send a copy of the NPRM, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration (SBA). See 5 U.S.C. 603(a). In addition, the NPRM and IRFA (or summaries thereof) will be published in the Federal Register.

Need for, and Objectives of, the Proposed Rules

In this NPRM, the Commission seeks comment on its policies for regulating presubscribed interexchange carrier-change charges (PIC-change charges). Specifically, we will examine whether to base the PIC-change charge on an examination of carrier costs or whether we can rely on market forces to ensure reasonable rates. We will consider what costs carriers reasonably can recover through the PIC-change charge and whether to take non-cost factors into account in determining a reasonable charge. We will also examine whether to establish a national safe harbor, whether carriers should submit individualized cost support with their tariffs, or whether we should review rates solely through our enforcement processes. We seek comment on these issues, as well as any alternative means of ensuring the reasonableness of PIC-change charges.

Legal Basis

The legal basis for any action that may be taken pursuant to the NPRM is contained in sections 4, 201-202, and 303 of the Communications Act of 1934, as amended, 47 U.S.C. 154, 201-202, and 303, and §§ 1.1, 1.411, and 1.412 of the Commission's rules, 47 CFR 1.1, 1.411, and 1.412.

Description and Estimate of the Number of Small Entities to Which the Proposed Rules Will Apply

The RFA directs agencies to provide a description of and, where feasible, an estimate of the number of small entities that will be affected by the proposed rules, if adopted. 5 U.S.C. 603(b)(3). The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” 5 U.S.C. 601(6). For the purposes of this NPRM, the RFA defines a “small business” to be the same as a “small business concern” under the Small Business Act, 15 U.S.C. 632, unless the Commission has developed one or more definitions that are appropriate to its activities. 5 U.S.C. 601(3) (incorporating by reference the definition of “small business concern” in 5 U.S.C. 632). Under the Small Business Act, a “small business concern” is one that: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) meets any additional criteria established by the SBA. 15 U.S.C. 632.

We have included small incumbent local exchange carriers (LECs) in this present RFA analysis. As noted above, a “small business” under the RFA is one that, inter alia, meets the pertinent small business size standard (e.g., a telephone communications business having 1,500 or fewer employees), and “is not dominant in its field of operation.” 15 U.S.C. 632. The SBA's Office of Advocacy contends that, for RFA purposes, small incumbent LECs are not dominant in their field of operation because any such dominance is not “national” in scope. See Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to William E. Kennard, Chairman, FCC (May 27, 1999). The Small Business Act contains a definition of “small business concern,” which the RFA incorporates into its own definition of “small business.” See 15 U.S.C. 632(a) (Small Business Act); 5 U.S.C. 601(3) (RFA). SBA regulations interpret “small business concern” to include the concept of dominance on a national basis. 13 CFR 121.102(b). Since 1996, out of an abundance of caution, the Commission has included small incumbent LECs in its regulatory flexibility analyses. See, e.g., Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, 61 FR 45476, August 29, 1996. We have therefore included small incumbent LECs in this RFA analysis, although we emphasize that this RFA action has no effect on Commission analyses and determinations in other, non-RFA contexts.

The Census Bureau reports that, at the end of 1992, there were 3,497 firms engaged in providing telephone services, as defined therein, for at least one year. U.S. Department of Commerce, Bureau of the Census, 1992 Census of Transportation, Communications, and Utilities, UC 92-S-1, Subject Series, Establishment and Firm Size, at Firm Size 1-123 (1995). This number contains a variety of different categories of carriers, including LECs, interexchange carriers (IXCs), competitive access providers, operator service providers, pay telephone operators, and resellers. It seems certain that some of these 3,497 telephone service firms may not qualify as small entities or small incumbent LECs because they are not “independently owned and operated.” See generally 15 U.S.C. 632(a)(1). It seems reasonable to conclude that fewer than 3,497 telephone service firms are small entity telephone service firms or small incumbent LECs that may be affected by this analysis.

Local Exchange Carriers

Neither the Commission nor the SBA has developed a special small business size standard for small LECs. The closest applicable category for these types of carriers under SBA rules is for telecommunications carriers, wired. 13 CFR 121.201, NAICS code 513310. See also 13 CFR 121.201, NAICS codes 513330 (telecommunications resellers), and 513340 (telephone communications carriers, satellite). The most reliable source of information regarding the number of LECs nationwide appears to be the data that we collect annually in connection with FCC Form 499-A, the Telecommunications Reporting Worksheet. Information from the Telecommunications Reporting Worksheets is compiled in the Carrier Locator report. See Carrier Locator: Interstate Service Providers, FCC Common Carrier Bureau, Industry Analysis Division (rel. Nov. 2001) (Carrier Locator). According to our most recent data, there are 1,329 incumbent LECs. Carrier Locator at Table 1. Although some of these carriers may not be independently owned and operated, or have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of LECs that would qualify as small business concerns under the SBA's definition. Consequently, we estimate that there are no more than 1,329 small entity incumbent LECs that may be affected by the proposals in the NPRM.

Interexchange Carriers

Although our actions as proposed would not directly affect IXCs, and therefore IXCs are not within the RFA for purposes of this IRFA, we voluntarily include them here to create a fuller record and encourage public comment. Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to providers of interexchange services. The closest applicable definition under the SBA rules is for wired telecommunications carriers. 13 CFR 121.201, NAICS code 513310. See also 13 CFR 121.201, NAICS codes 513330 (telecommunications resellers), and 513340 (telephone communications carriers, satellite). According to the most recent Carrier Locator report, 229 carriers reported that their primary telecommunications service activity was the provision of interexchange services. See Carrier Locator at Table 1. We do not have data specifying the number of these carriers that are not independently owned and operated or have more than 1,500 employees, and thus are unable at this time to estimate with greater precision the number of IXCs that would qualify as small business concerns under the SBA's definition. Consequently, we estimate that there are 229 or fewer small entity IXCs that may be affected by the rules.

Description of Projected Reporting, Recordkeeping and Other Compliance Requirements

We are seeking comment on whether we can rely on market forces to set reasonable PIC-change charges, or whether these charges must be regulated. If we find that the market reasonably sets these charges, there will be no additional reporting or recordkeeping burden on incumbent LECs with respect to these charges. If we determine that the market will not successfully constrain PIC-change charges, we must determine whether to establish a safe harbor below which PIC-change charges are to be deemed reasonable, or whether these charges should be cost-based. If we adopt a safe harbor, incumbent LECs will be in the same situation as under the current rules, i.e., PIC-change charges tariffed at rates below the safe harbor are deemed reasonable, and LECs have the option of demonstrating that their costs for PIC changes exceed that rate. If we decide not to adopt a safe harbor and require incumbent LECs to set PIC-change charges at cost, incumbent LECs will be required to file information demonstrating the costs of providing PIC changes.

Steps Taken To Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered

The RFA requires an agency to describe any significant, specifically small business, alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities. 5 U.S.C. 603(c)(1)-(c)(4).

We are seeking comment on alternative methods of setting a PIC-change charge, including whether market forces will successfully constrain these charges, and whether to adopt a safe harbor below which rates are presumed reasonable. These proposals would reduce the reporting and recordkeeping burden on all incumbent LECs, including small LECs.

Federal Rules That May Duplicate, Overlap, or Conflict With the Proposed Rules

None.

Filing of Comments and Reply Comments

Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments on or before June 14, 2002, and reply comments July 1, 2002. All comments and reply comments should reference the docket number of this proceeding, CC Docket No. 02-53. Comments may be filed using the Commission's Electronic Comment Filing System (ECFS), or by filing paper copies.

Comments filed through the ECFS can be sent as an electronic file via the Internet to http://www.fcc.gov/​e-file/​ecfs.html. Generally, only one copy of an electronic submission must be filed. If multiple docket or rulemaking numbers appear in the caption of this proceeding, however, commenters must transmit one electronic copy of the filing to each docket or rulemaking number referenced in the caption. In completing the transmittal screen, commenters should include their full name, Postal Service mailing address, and the applicable docket or rulemaking number. Parties may also submit an electronic copy by Internet e-mail. To get filing instructions for e-mail comments, commenters should send an e-mail to [e-mail], and should include the following words in the body of the message: “get form <your email address>.” A sample form and directions will be sent in reply. Commenters also may obtain a copy of the ASCII Electronic Transmittal Form (FORM-ET) at http://www.fcc.gov/​e-file/​email.html.

Parties filing paper copies must file an original and four copies of each filing. If multiple docket or rulemaking numbers appear in the caption of this proceeding, commenters must submit two additional copies for each additional docket or rulemaking number. All filings must be addressed to the Commission's Secretary, Marlene H. Dortch, Office of the Secretary, Federal Communications Commission, 445 12th St., SW, Washington, DC 20554.

Interested parties who wish to file comments via hand-delivery are also notified that effective December 18, 2001, the Commission will only receive such deliveries weekdays from 8 a.m. to 7 p.m. at 236 Massachusetts Avenue, NE, Suite 110, Washington, DC 20002. The Commission no longer accepts these filings at 9300 East Hampton Drive, Capitol Heights, MD 20743. Please note that all hand deliveries must be held together with rubber bands or fasteners, and envelopes must be disposed of before entering the building. In addition, this is a reminder that as of October 18, 2001, the Commission no longer accepts hand-delivered or messenger-delivered filings at its headquarters at 445 12th Street, SW, Washington, DC 20554. Messenger-delivered documents (e.g., FedEx), including documents sent by overnight mail (other than United States Postal Service (USPS) Express and Priority Mail), must be addressed to 9300 East Hampton Drive, Capitol Heights, MD 20743. This location is open weekdays from 8 a.m. to 5:30 p.m. USPS First-Class, Express, and Priority Mail should be addressed to the Commission's headquarters at 445 12th Street, SW, Washington, DC 20554.

Regardless of whether parties choose to file electronically or by paper, parties should also file one copy of any documents filed in this docket with the Commission's copy contractor, Qualex International, Portals II, 445 12th Street SW, CY-B402, Washington, DC 20554 (telephone [phone]; facsimile 202-863-2898) or via e-mail at [e-mail]. In addition, one copy of each submission must be filed with the Chief, Pricing Policy Division, 445 12th Street, SW, Room 5-A225, Washington, DC 20554. Documents filed in this proceeding will be available for public inspection during regular business hours in the Commission's Reference Information Center, 445 12th Street, SW, Washington, DC 20554, and will be placed on the Commission's Internet site.

Written comments by the public on the proposed information collections are due June 14, 2002. Written comments must be submitted by OMB on the proposed and/or modified information collections on or before July 15, 2002. In addition to filing comments with the Secretary, a copy of any comments on the information collections contained herein should be submitted to Judith Boley Herman, Federal Communications Commission, Room 1-C804, 445 12th Street, SW, Washington, DC 20554, or via the Internet to [e-mail], and to Jeanette Thornton, OMB Desk Officer, Room 10236 NEOB, 725 17th Street, NW, Washington, DC 20503 or via the Internet to [e-mail].

Federal Communications Commission.

Marlene H. Dortch,

Secretary.